Charles Shrem, who ran a New York–based Bitcoin exchange, was arrested on Monday and charged with engaging in a money-laundering scheme with a user of Silk Road, the notorious Deep Web black market.

In the federal criminal complaint, the Southern District of New York charges Shrem, the 24-year-old CEO of BitInstant, with three counts, including one count of operating an unlicensed money-transmitting business, one count of money-laundering conspiracy and one count of willful failure to file a suspicious-activity report. Robert Faiella, a Silk Road user who operated under the name BTCKing, was charged with one count of operating an unlicensed money-transmitting business and one count of money-laundering conspiracy.

The complaint alleges that Faiella took orders from Silk Road users hoping to purchase bitcoins, the anonymous peer-to-peer cryptocurrency. Shrem then filled the orders by transferring funds into an account controlled by Faiella and hosted on a third-party, Japan-based Bitcoin exchange. Together the two allegedly sold over $1 million in bitcoins to Silk Road users, who then used those bitcoins to attempt to anonymously purchase drugs and other illegal goods from the Deep Web black market.

According to Manhattan U.S. Attorney Preet Bharara:

As alleged, Robert Faiella and Charlie Shrem schemed to sell over $1 million in bitcoins to criminals bent on trafficking narcotics on the Dark Web drug site, Silk Road. Truly innovative business models don’t need to resort to old-fashioned lawbreaking, and when bitcoins, like any traditional currency, are laundered and used to fuel criminal activity, law enforcement has no choice but to act. We will aggressively pursue those who would co-opt new forms of currency for illicit purposes.

Shrem is a well-known advocate for Bitcoin and is a part owner of EVR, the only New York City bar that accepts bitcoins. He was such an evangelist for the currency that he earned mythic status among proponents of the virtual currency. “Charlie wears the [passwords] to his Bitcoin account imprinted on a ring around his finger,” one Bitcoin insider told the New York Observer last April. “I heard his co-workers call him ‘four-finger Charlie’ because they joke people will want to cut his finger off to get the key. If the price keeps going up, he could have a million dollars in that ring!”

Shrem’s company BitInstant is backed by well-known Silicon Valley investors, including Cameron and Tyler Winklevoss. The exchange has been off-line for many months. A class-action suit was filed against Shrem’s company BitInstant in August, alleging misrepresentation of the speed of its services.

The Winklevoss brothers, co-founders of Winklevoss Capital, a firm that is an investor in BitInstant, provided TIME with the following statement:

When we invested in BitInstant in the fall of 2012, its management made a commitment to us that they would abideby all applicable laws — including money-laundering laws — and we expected nothing less. Although BitInstant is not named in today’s indictment of Charlie Shrem, we are obviously deeply concerned about his arrest. We were passive investors in BitInstant and will do everything we can to help law-enforcement officials. We fully support any and all governmental efforts to ensure that money-laundering requirements are enforced, and look forward to clearer regulation being implemented on the purchase and sale of bitcoins.